Yellen and China’s Top Trade Negotiator Discuss Tariffs on Call

Lawmakers have limited time to clear ‘must-pass’ bills before midterm elections

Washington Focus

Congress is out this week. Lawmakers may be out of DC for the holiday but there are several must-have measures that will soon take center stage. Anything controversial has a likely legislative deadline of before Congress’ long August recess. Here are updates from some of the most-watched issues:

• USICA. United States Innovation and Competition Act (USICA) of 2021. This bill addresses U.S. technology and communications, foreign relations and national security, domestic manufacturing, education, trade, and other matters. Senate Minority Leader Mitch McConnell (R-Ky.) warned last Thursday that if Democrats are still “pursuing a partisan reconciliation” package, he will sink USICA. But there is bipartisan support for the measure, which is designed to boost U.S. competitiveness with China on high-tech research and manufacturing. Democratic leaders may put this bill as part of the coming $1 trillion reconciliation package that includes tax increases.  
   
• Reconciliation. Senate Majority Leader Chuck Schumer (D-N.Y.) and centrist and Sen. Joe Manchin (D-W.Va.) are trying to craft a roughly $1 trillion compromise package that can be voted on in July. Reconciliation instructions expire at the end of September, and the House is scheduled to leave town on July 29 (the Senate will stay in session another week). Also, any prolonged absence by Sen. Patrick Leahy (D-Vt.) following hip replacement surgery would be a major problem. Despite Democratic leaders hope of doing one more major reconciliation measure before midterm elections, some hurdles exist. A group of Northeastern Democrats has vowed to vote against any change to the tax code that doesn’t include a repeal of the SALT deduction limit. Raising the SALT cap would drive the cost of this legislation significantly. Manchin reportedly has raised concerns about the cost of any ObamaCare premium support extension, yet that’s a huge must-have priority for President Joe Biden and other Democrats.
  
  Any reconciliation bill likely would include some green new deal provisions, including an incentive payment for sustainable aviation fuel (SAF).
   
• Additional Covid funding. White House officials say more funding is needed so the federal government could build up its stockpiles of tests, vaccines and therapeutics for a possible next variant. Recent efforts for more Covid money have failed to garner enough votes.
   
• Jan. 6 riot Select Committee will have at least two more hearings this month. The panel has subpoenaed former White House counsel Pat Cipollone for a deposition k, but that issue could see court action. A final report from the committee is expected amid the possibility of making criminal referrals to the Department of Justice, including potentially for former President Donald Trump.
   

• FY 2023 appropriations. Well into fiscal year 2023, the two political parties still have no agreement on government funding, which expires at the end of September. House Appropriations Committee Democrats, led by Rep. Rosa DeLauro (D-Ct.) and House Majority Leader Steny Hoyer (D-Md.) want to have floor votes on some of these bills in July. Most think Republicans will sit pat while Democrats continue to push on reconciliation. Also, Republicans want a lot more money for defense than House Democrats or Biden have proposed.
   

President Joe Biden may announce a rollback of some U.S. tariffs on Chinese consumer goods this week, along with a new probe into industrial subsidies that may lead to more duties in strategic areas like technology, Bloomberg and the Wall Street Journal reports (link and link). Chinese Vice Premier Liu He and U.S. Treasury Secretary Janet Yellen spoke by videoconference about topics including American tariffs on Chinese goods, amid expectations that the Biden administration could roll back some of the duties on more than $350 billion in Chinese imports this week. The Treasury Department described the conversation as “candid and substantive.” A reduction would mark Biden’s first major policy step on trade ties between the world’s two biggest economic powers and go against the leverage his U.S. Trade Representative Katherine Tai, wants to keep.
 

Events on Tap This Week

Tuesday, July 5

• President Joe Biden ceremony to award the Medal of Honor to four Vietnam veterans.
• G7 Summit review. Center for Strategic and International Studies discussion on "Assessing the 2022 G7 Summit: The Sherpa Perspective." Event is an armchair discussion between Michael Pyle, acting U.S. deputy national security adviser and G7 & G20 sherpa, and Jörg Kukies, German G7 & G20 sherpa, about the agreements made during last week's Group of Seven summit. Among the policies that G7 leaders reached were an agreement to pursue ways to implement a price cap on Russian oil and a pledge to collaborate with partners to form a "Climate Club" by the end of the year. The leaders also pledged to prioritize "concrete and timely steps" to work toward a faster phaseout of "domestic unabated coal power generation," and they committed to "a highly decarbonized" road sector by the end of the decade and "a fully or predominantly decarbonized" power sector by 2035.
   

Wednesday, July 6

• Global finance. Peterson Institute for International Economics virtual discussion on "Global financial infrastructure amid shifting geopolitics."
• Preview of Republican Congress. Bipartisan Policy Center virtual discussion on "Previewing a Republican Congress."
• Supreme Court term review. Heritage Foundation Scholars and Scribes Review the Rulings: The Supreme Court's 2021-22 Term."
   

Thursday, July 7

• Farm Bill listening session. House Agriculture Livestock and Foreign Agriculture Subcommittee listening session on "A 2022 Review of the Farm Bill: Perspectives from the Field," to gather input from producers and consumers.
• Climate change and the Supreme Court. Resources for the Future virtual discussion on "Climate Change and the Supreme Court: West Virginia v. EPA."
• Monetary policy and inflation. National Association of Business Economics virtual discussion on "Monetary Policy and Inflation."
• Biden Mideast trip preview. Center for Strategic and International Studies conference call briefing on "Previewing President Biden's Trip to the Middle East."
• Federal Reserve Bank of Cleveland panel on investment in Black communities, looking at the status of infrastructure and services, the role of private industry and how public policy can alleviate the disparities that are stifling progress.
   

Friday, July 8

• Russian invasion of Ukraine: China’s role. Atlantic Council virtual discussion on "China's Role in Russian Energy: What's Changed Since February 24th?"

Economic Reports and Events for the Week

The Labor Department's monthly employment report for June comes Friday at 8:30 a.m. ET. U.S. employers added an average of 488,000 jobs a month through the first five months of this year. While that pace probably won't continue, overall hiring will. There have been some signs the labor market is cooling. Other key figures to watch: wage growth, labor-force participation and the unemployment rate.

Monday, July 4

• Holiday: Fourth of July.   
   

Tuesday, July 5

• Motor Vehicle Sales
• Factory Orders: Census Bureau releases the final durable goods report for May. Factory orders, which include both durable and nondurable manufactured goods, are expected to increase 0.6% month over month, after gaining 0.3% in April. The preliminary estimates released this past week showed that new orders for durable manufactured goods rose 0.7% to a seasonally adjusted $267.2 billion. 
   

Wednesday, July 6

• MBA Mortgage Applications
• PMI Composite Final
• ISM Services Index: Institute for Supply Management releases its Services Purchasing Managers’ Index for June. The consensus estimate is for a 54 reading, about two points less than in May. The Services PMI , which tracks economic activity in the nation’s services sector, has had 24 consecutive months of readings above 50, which indicates growth.
• JOLTS: Bureau of Labor Statistics (BLS) releases the Job Openings and Labor Turnover Survey (JOLTS). Economists forecast that there were 11.2 million job openings on the last business day of May, 200,000 less than in April. Despite anecdotal evidence of a weakening job market, the number of job openings remains near record levels, and roughly double the ranks of the unemployed.
• FOMC Minutes: Federal Open Market Committee (FOMC) releases minutes from its mid-June monetary-policy meeting. The FOMC raised the federal-funds rate by 75 basis points to 1.50% to 1.75% at that meeting, the largest increase since 1994.
• Federal Reserve. New York Fed President John Williams scheduled to speak.
   

Thursday, July 7

• Jobless Claims: Labor Department reports initial jobless claims for the week ending on July 2. Jobless claims averaged 231,750 in June and have normalized to roughly prepandemic levels, after a period of record high claims and more recently historically low jobless claims.
• ADP Employment Report
• International Trade 
• Fed Balance Sheet
• Money Supply  
• Federal Reserve. St. Louis Fed President James Bullard scheduled to speak.
   

Friday, July 8

• Employment: BLS releases the jobs report for June. The economy is expected to add 250,000 jobs after gaining 390,000 in May. The unemployment rate is seen remaining unchanged at 3.6%, near historic lows. Average hourly earnings are forecast to rise 5.2% year over year, matching the May data.
• Consumer Credit: Federal Reserve reports consumer credit data for May. In April, revolving credit, which is mostly credit card debt, increased at a seasonally adjusted annual rate of 19.6%.
• Federal Reserve. New York Fed President John Williams speaks at the University of Puerto Rico Mayaguez about the outlook for the U.S. and local economy.
   

Key USDA & international Ag & Energy Reports and Events 

With Acreage and Grain Stocks reports released last week, focus returns to U.S. weather and crop developments following significant declines in commodity prices over the past few weeks. 

Monday, July 4

     Ag reports and events:

• Holiday: Fourth of July  
   

Tuesday, July 5

     Ag reports and events:

• Export Inspections
• Crop Progress 
• Amber Waves

• Purdue agriculture sentiment
• StatsCanada publishes data on seeded area for wheat, durum, canola, barley and soybeans
• EU weekly grain, oilseed import and export data
• Malaysia’s July 1-5 palm oil export data
   

     Energy reports and events:

• API weekly U.S. oil inventory report
• EIA update on delayed reports
• Holidays: Venezuela, Argentina
   

Wednesday, July 6

     Ag reports and events:

• Broiler Hatchery
• U.N. annual state of food security report
   

     Energy reports and events:

• Genscape weekly crude inventory report for Europe’s ARA region
   

Thursday, July 7

     Ag reports and events:

• Brazil’s Conab releases data on area, yield and output of corn and soybeans
   

     Energy reports and events:

• EIA natural gas storage change
• EIA Petroleum Status Report
• Weekly Ethanol Production
• Singapore onshore oil-product stockpile weekly data
   

Friday, July 8

     Ag reports and events:

• Weekly Export Sales
• CFTC Commitments of Traders report
• Peanut Prices
• Livestock and Meat International Trade Data
• U.S. Agricultural Trade Data Update
• FAO world food price index, grains supply and demand outlook
• FranceAgriMer weekly update on crop conditions
   

     Energy reports and events:

• Baker Hughes weekly U.S. oil/gas rig counts
• Holiday: Venezuela